Diamond Industry Profitability Needs Luxury Mentality, Not More Cost-Cutting

Rough Market
26/07/2016 22:54

Comparing the current mentality of the diamond industry - in particular the midstream manufacturers - to that of mass production in the textile industry, Ehud Arye Laniado argues that the way to restore dwindling profitability is by restoring the luxury aspect of diamonds, and not by slashing labor costs, seeking favorable tax regimes and free trade zones. "How is it possible that an industry that manufactures luxury products is operating as though it provides low cost, price-point driven items? ... How did this happen to an industry that produces luxury items and caters to upper middle-class clientele who have set aside money for expenditures? Will a 5% price difference really determine if a diamond is sold? Will cutting already low labor costs by a few percentage points really make diamonds more attractive?" Apparently, the answer - which it is up to the diamond industry to change - is yes.

"The textile industry is under great pressure to provide lower-cost products at a greater scale than ever before, which has resulted in the migration of manufacturing to countries like Bangladesh. Is this where we want to take the diamond industry? Into a paper-thin margin manufacturing zone just to satisfy desires for a low-cost, seasonal item? To me, this seems all wrong." To make it right, Laniado says thoughtful purchasing of rough diamonds on the one hand, and education and marketing on the other will benefit profitability through better positioning of diamonds - as a luxury product. In other words, keep costs in check, but mainly, "reposition diamonds as the ultimate luxury item. There is room for mass-produced items, but those should not be the heart of our activity, only an additional outlet. The heart of our activity must be creating a luxury item while distributing a significant portion of them for capital preservation purposes, positioning the polished diamond as such an item, and profiting from it the way it deserves."